Tag Archives: sandwich generation

Just a bit terrified of making decisions…

I wish my husband and I could have a straightforward conversation about why I feel uncomfortable with buying a house with gift money from his mother, and then with her living there as well (in an in-law unit.) Financially it is not a horrible idea (as long as we never get divorced) but emotionally it’s really weighing on me. It isn’t even the living with her that is making me uncomfortable, I just don’t want to merge our finances.

His mother also is being put in a bad situation, even though in her nativity she may not know it. What if she gives us $1M and a few years down the road my husband is hit by a bus, and I want to sell the house and move closer to my family across the country? Even if I wanted to give her back the $1M at that point after selling the property, I couldn’t do this without having to pay taxes on this. There’s no clean way to give her the money back. So then I’d be stuck.

Now hopefully my husband won’t die… and all of the other 10,000 equally awful scenarios won’t actually come to fruition (i.e. I get a brain tumor and go batshit, or get in a car accident that is my fault and creditors come after our house and take it away, etc etc.) There are just SO many things that could go wrong and my husband is all like THIS IS FINE it’s NOT A BIG DEAL. It is a big deal. It’s a very big deal and a very big amount of money and maybe I’d be more comfortable with it if he treated the situation as such. I’m reaching out to lawyers to make sure that if we’re going to move forward we have everything clearly in writing regarding the what ifs. He gets upset at me for being concerned. It’s frustrating.

He also is really having 2000 sq ft house envy, which is partially my fault as we’ve been house shopping for over a year now and I’ve shown him some bigger homes in the area so that the ones we can (barely) afford(?) that are 1200 square feet seem too tiny to consider. I get it. I want a house with big rooms and space to grow and just space overall. But without his mother’s money, we should be spending no more than $1.5M on a house and really less than that (if you want to go for the 2x income, we should be spending $500k-$600k on a house, but that will not get us a studio apartment out here.)

I’m starting to lean towards buying something in a “lower cost” area — San Bruno, Pacifica, South San Francisco, Daly City — maybe even Hayward. I’ve also finally accepted that what we buy today may very well not be our forever home, and if it is then we’ll learn to love it (yes, it’s hard to be willing to compromise so much when still spending $1.3M-$1.5M, but that’s the reality of life in the Bay Area.)

I knew going into my marriage that my husband and I don’t see eye-to-eye financially. He’s perfectly happy making $90k 1099 per year, never asking for raises, working in the same non profit for the last 10+ years. I was also making $90k at some point, but that was a long time ago as I’ve moved jobs and received raises and bonuses and such. I do believe that marrying him was the right thing to do–we love each other and that’s what matters. We also both entered the marriage with no debt, which helped. We pay for our used cars in cash. We still save more than we spend. We’re not from totally different planets when it comes to money management.

But looking forward over the next 10 years, I want to have 1 to 2 more kids, and I just don’t see how it all works…

As some of my readers have suggested, we could and probably should continue renting, get a bigger place as a rental and we’ll still be better off than buying. But my husband now is opposed to renting a bigger place! He really wants to buy. With his mom. He doesn’t want to deal with moving and having to move again (and again and again.) I get it. But right now, maybe it’s not the right time to buy. Or maybe it is — mortgage rates are low, we have $1M in net worth, we’re both employed, we have one 1 year old and may have another or two in the next 2-3 years…

I am sad that I don’t have a husband who I can talk to about my concerns and be heard. I wish we could be in this together but it doesn’t feel like we are. He will pay up to $2500 a month in mortgage so my only option is to find a house I can personally afford where the rest of the mortgage is on me. I haven’t figured out how to make that work, especially given my job stability is always non existent and my mental health continues to be a train wreck.

In better news, I finally applied for term life insurance and submitted all my tests/paperwork… (guess what, my husband is putting off submitting his!) — anyway, that’s the subject for another post. I’ll find out if I’m accepted at all and what my rates will be next week. Until then…

How to Help My Mother NOT go Broke

They paid for college and a relatively lavish wedding and a lifestyle we apparently never could afford. They made a lot of bad money moves along the way–constantly adding on to and updating a house that was already the most expensive on the block, buying worthless art and “collectables” to clutter the house, taking money out of the markets around 2008 and missing out on the potential returns. Oh, and the kicker is that in 2015 and 2016 my father took a ton of money out of his IRA to buy a condo in florida and pay for my wedding without paying nearly enough in taxes to support those withdrawals, not to mention apparently not filing at all those two years, leaving my mother with $60k in tax debt and fines. For a man who made a career out of planning financial risk, he sure did a horrible job of planning for his and my mother’s retirement.

Dealing with his pretty traumatic death (a week after my NICU son was born last year) was hard enough–but not having to help my mother somehow NOT GO BROKE is going to, well, break me.

Now, I realize they paid for my college AND my wedding and I do feel a responsibility to 1. help her not go broke and 2. pay her back a reasonable amount for some of these expenditures. On one hand, had I known how bad the financial situation was, I might have made a different decision on where to go to college (public vs private school, which was an option) and I would have been less reckless with my spending at the time (when I didn’t understand budgeting or the value of money, sad to say.) But I did save on interest on student loans and I feel like I owe it to my mother to pay her back for at least some of my college education.

…The wedding was a beast of an event–but for my father dying of cancer it was as much his party as it was mine and for what it’s worth I saw him enjoy it perhaps more (much more) than I did with his family and friends. I had offered to pay for it up front so he wouldn’t have to withdraw from his IRA and he flat out refused, but I didn’t have a clue that ALL the money was in the IRA and the wedding plus their condo purchase just killed them tax wise those years. I can’t really blame myself for that as he told me “$50k for the wedding” and I went with that budget. He was too proud to admit that really he didn’t have the $50k for my wedding (and supposed $50k for my sister’s wedding that hasn’t happened yet) — maybe he thought he did. Maybe he was in denial. I don’t know. We shouldn’t have spent that money in 2016. I should have eloped.

I guess until tonight I hadn’t come to terms with just how bad the situation is. It doesn’t HAVE to be as there is a decent pension and social security, but my mother refuses to adjust her spending beyond perhaps not buying 4 matching pants to go with the 8 shirts on sale she just has to have. She’ll buy 2.

After interviewing a ton of CFPs (mostly fee only) I just felt like they weren’t going to add enough value to be worth their 1% annual management fees. It’s not that they wouldn’t tell her the right things she needed to hear, it’s that she would hear it and it would go in one ear and out the other. She’s just so far off from OK, I’m not sure WHERE to start. Scratch that, I know we should be selling her tri-state home IMMEDIATELY to start saving along the lines of $30,000+ a year — BUT, even that just scratches the surface of the issue. Even if I paid her back for the wedding and my entire college education, I’m not sure that gets her where she needs to be.

After all the CFP interviews I set up an appointment for her with Vanguard personal advisory services which is “just” .03% of her portfolio (really not that bad since her portfolio is just $400k in IRA at the moment, but also I get the sense that its’ about .03% of a real CFP service. What I like about it is that it’s .03% split out per month and you can get out at any time, so we can get some advice for cheap from a real CFP (or team of people who work with CFPs) and get some sense for what to do before investing in a private CFP. For free, they ran a basic plan for her… which was just depressing… and had me revisiting her spending and income and, well, the picture isn’t pretty. The picture has oozing wounds and horse shit that’s been festering for centuries covered in maggots.

And she’s doing BETTER than most people in America right now. She has $70k in fixed income (taxable, but still), $400k in the IRA and a home probably worth about $250k cash after it’s sold. But that’s nothing. She’s 65 and she’ll be broke by 70 at this rate.

I don’t know what to do. I don’t know how to get her to take this seriously. She is in LALA land. I don’t want to give her $25k or $50k or more UNLESS she can actually learn to budget properly and makes plans to help smooth this all out, somehow. Instead of saying that she CAN’T sell the house next year, she realizes that she HAS to sell it next year (sadly) and really she should sell it THIS YEAR. She CAN’T get a storage unit to keep all her random things and she HAS to sell what she can and move to her condo full time as soon as possible – even if that means not going to her condo this winter and staying in the cold weather to pack (but, as she says, she would have to buy a whole new winter wardrobe, which would cost a lot, so she should not stay there to pack up the house this winter.)

My thought on helping her out financially is that I need to get my ducks in order first (i.e. buy a house, pay off said house, have a stable career for next 10 years, invest my money) and if in 10 years she has been spending smartly then I can help pay for things like buy her a vacation package or even pay the basic bills if needed, up to a certain point, especially to ensure she’s comfortable in old age when she needs to have help.

It just all feels so unsurmountable I’m erring on the side of just being delusional like my mother and letting her run out of money at 70, go into credit card debt, and then… then what? She has an HOA to pay (her condo was “cheap” but it’s not cheap on a fixed income, and who the hell knows what special assessments will come up over time?)

Any advice on what I should do, other than send my mother a check for $50k and run the hell away from this?

 

How Did My Father Leave Such a Financial Mess?

It has been a while since I’ve written about my mother’s financial situation because seeing the full picture of the train wreck that it is has taken time since my father’s passing. I think we now can see it – and it’s not a pretty picture.

We lived in a fantasy wackadoo financial world, and I never realized this until seeing the hard numbers after my father passed away last year. Sadly, there was a time when there was a significant amount of family wealth–but since my father retired early and then went on disability around age 55 and then got cancer and was told he had 2 years to live and then lived for 8 more, the money disappeared. Well, it was spent, and it was mispent.

My mother isn’t entirely at fault for this. Did she spend the money? Yes. But my father was abusive to her and not only would not let her be involved with the household finances but also told her that the financial situation was fine and she would be set for life. He told me that he had $50,000 set aside for my wedding and another $50,000 for my sisters (I would have never spent $50k had I understood the actual financial situation, and I do feel guilty about this and also want to help as much as I can at least up to that amount over time, but I can’t even afford a house right now so it seems like now is not that time – but down the road, should my mother be out of money, by then hopefully I can help.) Anyway, it was either one big fat lie or my father was delusional (and who knows what the strong cancer drugs did to his mind in those years, let alone his standard aging process.)

I’ll never know what happened. I know from around 2005 to 2018, my parents lost a significant chunk of wealth and it didn’t have to be that way. I know that I will always feel guilty for not stepping in sooner to really push them on their financial situation. I don’t know if I could have helped as my father, until close to the end of his life, kept this information to himself–he even did his own taxes (which was part of the problem–as he DIDN’T end up doing them for a few years) — and everything is clearer in hindsight but I just am not sure if I could have done anything at the time to help avoid this nightmare. Regardless, it’s too late to go back and change things. All I can do is try my best to help the current situation.

The current situation is that:

  •  my father’s supposed “paid” taxes were actually three years of unfiled, unpaid taxes, with two of those years having major amounts owed and massive penalties on top of these amounts – to the tune of $60k+
  • my father was unable to handle dealing with his certain death, despite having 10 years of living with a terminal illness, so my mother had to, the day after he died, race around to find a burial site and pay top dollar for their plots and the service, etc. This cost $30k. I couldn’t bring myself to push for cremation, even though I know it would have been cheaper. The $30k was also due to my mother picking a nicer cemetery (since she’d be buried there too!) and not having time to shop around. Then there was the reception after the funeral… it wasn’t at the fanciest place but everything adds up when you have a lot of people and last minute expenses.
  • So it turns out there was no money out of the IRA (just $400k in there, more on that in a bit) to pay that $30k, then put on my mother’s credit card. My uncle (father’s brother) kindly let her borrow the money to pay it, but she owes him it back by 2020, which is right around the corner. All this happened before realizing there was such a massive tax bill due!
  • my father (and mother) took out a home equity loan to the tune of $200k on a home valued $500k (which was paid off!!!) in order to add on to their house, renovate bathrooms, who knows what else. My mother has no idea what everything cost and sadly there are no records that we can find (which is shitty, because it makes her have to rush to sell the house, see next bullet – though maybe this is a good thing.) Anyway, there’s a $200k home equity line of credit that is tapped with variable interest that’s about $650 a month right now interest only that will be $1600-$1800+ starting May next year when she has to pay principle and interest…
  • I didn’t realize this, but after your spouse dies, you have 2 years to sell your house to get the $500k capital gains exclusion… after that time it goes back to $250k. If my mother and father kept good records of all the work they had done to the house over the years, this wouldn’t be an issue–but, shockingly, these records are no where to be found. My father supposedly, messy as he was, kept all his papers – so I’m hoping they will turn up somewhere, but so far, no luck in finding them…
  • the house is a money sink. This is the hardest for me because I grew up in that house and I’m so emotionally attached to it. I know a house is a house is a house and the memories made in it will never go away once it’s sold, and people sell their childhood homes everyday and it’s not like we could own the house forever—but that doesn’t change how hard selling the house will be for me. I don’t have a great memory… but when I’m back in those walls, my childhood comes flooding back, the good and the bad of it, and I feel like time isn’t slipping away quite so fast. I also dreamed of having my children visit my parents there–it’s a great “grandmas house” — to spend lazy summer days playing in the backyard on vacation as my mother watches my kid(s) run around… it’s just readjusting the plans I had and mourning the loss of my father, my childhood, my past. It has to happen sometime–why not now? But I don’t feel ready for it. I’m so not ready for it I’m wondering if there is a non idiotic way I can purchase the home and rent it back to my mother–just so she has access to the cash and we still keep the home in the family for another few years. I know I can’t even afford my own home living in The Bay Area BUT this would motivate me even more to keep my job and earn more money. The house is worth $500k-ish, and that’s actually affordable. If I can’t buy property here, then is it horrible to own property elsewhere?… but it’s in a high tax state and the taxes on that house are killer, and so is managing the property… it’s not a HUGE house but it’s certainly not small, and the land is expensive to take care of. It doesn’t make sense, but that doesn’t stop me from daydreaming about buying the house and helping my mom stay there for another few years and still get the $500k in capital gains exclusion in time…
  • In the years of financial recklessness, my parents purchased a “snowbird” condo in Florida. My father told my mother this was always going to be a vacation home, so they purchased a 2br/2ba condo for $60k and fixed it up for another $40k (or so I’m told) paying cash on this (which kills me because it was yet another expense that led to having to pay a bazillion dollars in taxes since all the money was held in the IRA and my dad then somehow failed to pay the right amount those years) — he could have taken a mortgage to buy the property and not paid for it all up front. He could have taken me up on my offer to pay for my wedding or at the least to pay for some of it since I had access to money and he could pay me back over time, if he really wanted to pay for the whole thing. But he was too prideful, or his brain was broken, or both. I wish I could ask him what the hell he was thinking. But they bought they condo. That $100k in cash, with tax penalties for taking the money out of the IRA and not filing/paying on time, probably ended up costing them $200k. I am not sure how to figure out how much money was lost by simply failing to manage the money left wisely due to it being in “tax advantaged” accounts, and I’m not sure it matters now–but I know there was a substantial amount lost because of extremely poor management.
  • The good news is that my mother set up the condo in Florida to meet her liking, and she seems happy there. It’s unclear if she will be happy living there full time since most people in the community go home for the summer and I worry she will be lonely. At least she is the type to be happy anywhere there is a pool and people willing to listen to her stories. But in the summers there it will be extremely hot and the pool area will be rather empty. Her sister also now lives in Florida but a 2 hour drive from her condo. I worry about her being alone, or more alone then I ever imagined she’d be. There’s nothing wrong with retiring to Florida (certainly tax wise it’s a good idea) but how can I manage to help her as she ages without other family close by to check on her, etc? And no money there to help put the proper support system in place?
  • My father was talked int putting an annuity with a death benefit in his IRA by a Bank of America rep. I talked to the rep after my father’s death and he shared why he thought it was a good idea (I’m unsure, but too late for it to matter.) My mother did get a ‘death benefit’ payout in the IRA, which is now sitting in cash, which is a problem, because of the $400k in the IRA, only $100k is in investments and the rest is sitting in cash – and I’m sure to afford her life the rest needs to at least be in bonds or something that is making money but it’s not. We want to hire a CFP but after working with my CFP (more on that in another post) I’m not sure what CFP is the right option as they’re quite expensive and CFPs typically don’t manage tax issues, or other weird issues like the ones my mother is facing. They can certainly run an analysis of when she’ll run out of money and when she has to sell the house, but we still don’t have the final tax bill so it’s hard to even run those numbers yet.
  • Taxes. Do we hire a lawyer or enrolled agent to help with attempting a penalty abatement and lower-cost-per-month payment plan? Another substantial expense and I’m not sure it’s worth it – I mean, it’s worth it if we can get the penalties abated and a good payment plan, but it seems like either we can do this ourselves or the IRS won’t allow this. My father apparently had a number of years where he already had a bad history of payment on time, so the IRS may just disallow our abatement request. However, I’m hoping with proper documentation on my father’s illness and also my mother’s documented abuse record, there’s a chance they’ll take off some or all of the penalties. Do we really need to spend $5000 on a lawyer to do this? I feel like I can probably help here and save that $5000, but if it doesn’t work my mother may blame me (even if it wouldn’t have worked with a lawyer) and if it does, but partially, then how will we know if we got the “best” deal? But all his money – $5000 for a tax lawyer, $5000 for a CFP, etc etc, needs to come from somewhere and that requires taking more out of the IRA. I’m trying at this point to help her avoid taking too much out of the IRA.
  • The good news – if there is any good news – is that my father did have a sizable pension and made sure to take the one that would provide lifetime income for my mother. That, with social security, amounts to something like a $50k-$70k salary before tax. A single person SHOULD be able to live on that income just fine…
  • But my mother is horrible at budgeting. That is to say she refuses to budget. I have her set up with a Mint account and I’m watching and documenting how much she spends on everything each month. She has definitely reduced her spending A BIT but I can’t get her to stop buying clothes “on sale” and spending on unnecessary items. Right now she is spending about $40,000 more than she earns per year, give or take as I’m not sure what her total tax liability is for this year. With $400k in the IRA, she is going to be in credit card debt in a few years at this rate. It will slow a bit once she gets the full SS amount (see blow), but not enough. Really the only way to stop the bleeding is to sell the primary house…
  • This is ESPECIALLY important this year because we have decided (and I’m not sure if it’s the right decision) to wait until she turns 66 to take the full survivors benefit for social security. If the math we ran was right, it will take about 17 years till break even on this choice – so it might not make any sense at all. I think it’s a pile of shit how social security works in that you’re supposed to get the same amount whether you live a long time or not long as all as long as you properly estimate when you’re going to die–because that’s an easy thing to guess.
  • My father made other bad money moves that have left residual issues. A few years ago my sister got into a car accident that wasn’t her fault. She earns minimum wage and although my parents paid for her car in full she didn’t have the type of insurance on it that would pay out in the case of a hit and run. Well, she was in a hit and run and her car was totaled. She was willing to pay a certain amount for a new car (about $10,000) but my father decided that $10,000 was not enough to get a car that was “safe” he would pay $5000 on top of that for her to get a certified pre-owned Toyota Corolla. That certainly was nice of him to do, and would make sense if he had the money to spend in the first place.  He did decide not to pay for this in cash entirely and instead to take out a low interest loan offered by the dealership, you know, while he had a terminal illness… without thinking what happens to the non-transferable warranty or Gap insurance he paid for in the purchase price when he died. So now another issue is figuring out what to do with my sister’s car… about $6000 is left owed on it, and my sister has been dutifully making monthly payments on the % she owes, but apparently once the person on the loan dies it’s necessary to pay off the loan with the estate (so I’ve read) or take a new loan out to pay off that loan. My sister assumes my mother will pay off the loan and she can pay her back, which is fine except that will require taking $ out of the IRA to do and that will cost more than $6000. So I suggested my sister look into how much a new loan would cost (I assume the interest on a loan — if she could get one — would be quite high.) I told her find out what this would be and then let’s talk. I could possibly loan her the $ at a much lower interest rate. Maybe I should just give her the money at 0% interest rate (and I might) but I’m trying to strategically figure out where I should be offering money to help with the whole mess across the board, while also trying to save for a down payment and afford my life. I don’t mind loaning her the money and maybe even for 0% interest but I want her to take the steps of figuring out how much it should cost her to get a loan and at least be an adult about this.
  • My sister finally moved out of the house and in with her boyfriend and she got a job that pays shitty but at least has benefits. So my sister is no longer living rent free (with high utility bills) in my mother’s house, so that will bring down costs a bit, but I’m worried about my sister’s financial well being in the long run. She has no retirement savings and isn’t listening to me when I’ve told her to put aside more money for emergencies and such. I ran her budgets and I know it’s tight and she thinks I don’t understand living in relative poverty but she can be making better decisions overall and I’m hoping eventually she listens to me so I can help her start on the path to financial security. I’ve always said I would never let her end up on the street and I definitely wouldn’t, but I want her to at least take responsibility to try to manage her money better. She doesn’t have any debts outside of the car situation, so that’s good, but she also doesn’t have enough money in an emergency fund and it’s different now that my mother can no longer afford to help her out if needed. I can, as long as I don’t own a house and I keep my job, but I really want her to try as hard as possible for it not to come to that. It’s not like she spends a fortune on things, but when you make that little you have to be even more cautious with your budget.
  • There is so much crap in the house that selling it will be a nightmare. My father has always been a “collector” of (likely) worthless stuff — paintings and sculptures from art shows, baseball figurines, records and CDs and DVDs, books, and who knows what else. Maybe some of it is worth something but selling it all and determining if any of it is worth more than pennies on the dollar is going to take more time than it’s worth. Once he was diagnosed with terminal cancer his collecting definitely increased. I get it – he was dying and collecting was a hobby and maybe helped him feel like he wasn’t in such a horrible position. Still, I wish there was some fiscal logic in the behavior those last years the my parents should have been downsizing anyway, not buying more stuff.
  • My father almost built an additional storage unit in the back of our house (the house already has 3 attics!) as my mother is a hoarder and has run out of room for stuff. Did I mention I’m not looking forward to cleaning out the house to prepare it for sale?
  • My parents spent a lot on making the house accessible and livable for my father. This wasn’t necessarily a bad thing, but the amount of years of use vs the probably better thing to do of selling the house years ago and moving to an accessible building just is sad when you look at it from a sheer numbers perspective. Even if they did want to stay, they could have more wisely spent those dollars, and less of them, to make it livable but not to the point of spending way more than the house will ever be worth.
  • Meanwhile, parts of the house are falling apart. The oven has been broken for years. Who knows when a new roof is needed (not my mother, that’s for sure.)  There will be costly updates before selling the house likely that weren’t handled with all the money spent on additions and renovations.
  • He paid for years into long term care but ended up not using it at the end because to use it he would have to admit he was dying soon and he never could. He also wanted to be home and the LTC policy did not cover the full amount of in home care, so I think he knew he didn’t have the money to use it- but unfortunately was unable to have an honest conversation about this – so his last months were spent first in the hospital, then in rehab, and then for a horrible few weeks at home where my mother could not properly care for him, and then his condition worsening (who knows if it would have been better if he never went home or had actual in-home care), and then back in the hospital and then back in a different rehab where he died. That whole process is a long blog post or a book of trauma which haunts me and makes me feel sick every time I think about it. But from a financial perspective, it was just extremely sad that he didn’t use his long term care policy when he needed it most. Meanwhile he stopped paying for my mother’s LTC policy years ago because he said it was “too expensive.” Well, now it’s too late to get her one (probably) and she probably will be the one who needs it. I’m terrified of what happens as my mother ages. She may be a looney toon but she’s still my mother and I want to make sure she’s as ok as one can be in her senior years.
  • My father constantly mentioned wanting to pass money down to his children (myself and my sister) and while at this point I do not expect that, it’s still sad that he made this comment time and again (esp for my sister since he saw her as incapable of taking care of herself) and now there’s basically nothing left. I don’t know how to advise my mother on this as I don’t want to have anything to do with whether or not she cares to pass money down to her children (and I certainly don’t feel like I have the right to anything) but I am worried about my sister and I also just think it’s sad that this was so important to my father but he failed to set things to up to make sure it happened. As a parent now, and one who hopefully accumulate substantial wealth, I want to make sure my child(ren) are set up to be ok even if the world goes to shit.

Well, I’m sure I’m forgetting and/or not seeing other financial issues that will come up. Thus far we’ve successfully filed 2015-2017 taxes (and have an extension on 2018) so that’s step 1. Baby steps. I see the light at the end of the tunnel here, once the taxes and loans are paid off, and the main house is sold. I think her Florida condo, as a full time dwelling, should help her get to at least break even for a few years, and hopefully she can even save some of the pension and social security money at some point to increase her investments and stretch out what’s left of the IRA.

A Widowed Mother Who Lost Her Wealth (And a Grieving Daughter Trying to Help)

My family was never wealthy, but for my entire life we’ve been more than comfortable–comfortable enough to not pay close attention to our spending. While we never took lavish vacations (unless paid for by points acquired through my father’s work), we didn’t budget. We should have.

As an adult with my own job and an understanding of the value of a dollar (and my motto – no matter how much you make, every cent counts), I’ve managed to build up a networth of over $650k, give or take, at age 35. I want to be proud of that. I want to enjoy this as some sort of accomplishment. But I can’t. I can’t because I feel incredibly guilty and lost when it comes to helping my mother out of the financial mess she is in right now.

Some may look at her situation and say it’s not that bad. I guess it isn’t, but it will be soon if she doesn’t plug up the holes in her sinking ship. Not all of the holes are her fault–but she’s just so delusional and has no ability to stop spending. It is impossible for me to advise her beyond subtle suggestion that she cease spending when my parents paid for my college education, a nice wedding, and an overall nice life. Part of me feels like I ought to help her out and provide the funds to plug up some of those holes. And–most of me knows that even if I were to give her my entire $650k, she’d still find a way to burn through it.

This is a long story… a very long story… and one that is keeping me up at 2am with a newborn who is sleeping so I really ought to be sleeping. I can’t sleep. I can’t do anything but let my mind spin on this giant dilemma, trying to find some sort of solution to the puzzle. There isn’t one that’s pretty or that my mother will agree to. But, after sitting back and letting my recently-deceased father make a mess of the finances in his last years of life (not that I had much say in that, but I could have maybe done something… more on that in a minute)… I feel like NOW I have the opportunity to stop this sinking ship before it reaches the bottom of the ocean.

The picture was looking rather unfortunate on the first go-round of budget vs income that I quickly ran after my father passed away this summer and my mother had to make some decisions about her social security survivor’s benefits (which are confusing as hell, yet to be fully understood, and the subject of another post I’ll write one day.)

As we did more digging, we uncovered that in 2014 there was $1M in an IRA. By 2017, only $400k remained. During that time, there was the purchase of a second home which cost, including renovations, about $100k (or maybe more because my parents seemed to always underestimate the cost of their renovations and not keep tab.) There was my wedding, which, at $50k, was a lovely affair and something that made my dying father beam with joy, but was an event that never should have happened given the financial situation my father either somehow didn’t understand or hid from me and the family. He said, over and over again, he had $50k set aside for my wedding and $50k for my sister’s. He said many things. I’ll never know if he was delusional due to the cancer drugs, unrelated mental illness, old age, or maybe just a serial liar–to not only us but himself.

When he was working he was bringing in good money, at least for a middle class household. Ironically the man who left his family without a stable retirement spent his life’s work as an actuary–planning pensions for companies and accessing risk of running out of money to fund those pensions. I try to find humor in this.

But then, and I guess I didn’t realize this since I was already away at college, he stopped working around age 55 due to his obesity and mobility issues, and then shortly after that began collecting disability. His work paid out nicely for a few years, and also offered a good pension, but the reality was (and where I was blind sighted is) that the amount coming in did not cover the amount spent. I don’t know the exact gap, but it was substantial, and ignored.

Although the wedding was a big expense and the second home purchase wasn’t for pennies,  what really did them in, based on my research into the last 10 years of spending, was their crazy high expenses. My mother, ever in denial, would say she doesn’t spend like rich people do, then come home with piles of clothes “on sale” from Chicos or some “non luxury” store, not to mention a pile of face creams on auto-purchase from QVC and who knows what else. Then, there was the dining out bills, and the $600-a-month house cleaning services (I’ve convinced her to drop that to 2x at $300 a month.)

I’m not one to judge how they spent their money — they had a right to spend it any way they wanted. And I understand my father, facing certain death, wanted to enjoy his limited wealth in his final years. It was just the perfect storm of financial chaos. Even his long term care policy, dutifully paid into for many years, likely costing over $20,000, ended up going unused because he refused to admit he was dying–or, perhaps because he realized that the policy didn’t actually cover enough to not require dipping further into the shrinking retirement savings left.

With this, I’m left to wonder if my father, as ill as he was, didn’t go to doctors outside of his cancer doctor because he hated going to the doctor–or, if part of this was because he couldn’t afford the treatment. In the end it wasn’t the cancer that killed him, but issues with his heart and blood pressure–perhaps related to his cancer treatments, but undoubtedly something he could have had treated better over his life and especially those final years… but he chose to only focus on his cancer. If his goal was to die of something other than cancer, then he succeeded. I’m pretty sure his goal was to live forever and he couldn’t think of the world any other way. I get that, no one wants to admit they’re dying–but when you are facing a terminal illness and are told you have 2 years to live (and then you manage to live more than 10) at the very least you can pick out a funeral plot and prepay for a burial, not leaving your wife to run around to cemeteries the day after you die to pay the highest possible amount for both of your graves (yes, this happened. Yes, I was out-of-my-mind with a one-week-old at this time, trying to provide advice.)

But now–now the biggest issue, and the one I find saddest–is that we’ve uncovered a horrible situation regarding taxes. Taxes unfiled and unpaid. All of the numbers I’ve been running to try to save her primary home in the northeast–which, while worth $500k, has a $200k home equity loan out on it, by the way–were thrown out the window. And I threw my hands in the air. I give up. This is looking bleak. Sure, she can cut all of her spending. She can stop the house cleaning services and limit work on the house to only vital fixes for a while… nothing cosmetic. But even then, she starts dipping into that small $400k IRA immediately–which shrinks to almost nothing after the taxes are paid, and she has nothing left to pay the home equity that comes due in 2020 and flips to principle and interest at 3x what she’s currently paying.

In short, the only real answer is to sell one of the properties, and sooner than either of us would like. I’ve told her clearly that the northeast home, while a place that holds all of my memories as a child, and one I’d love to keep, is a complete money suck and sadly I think it needs to go. She agrees, but wants years to clean it out (she’s a hoarder and my attempts to help her get rid of things on my last visit, outside of taking care of a 3 month old, did not make a lot of progress.) I selfishly want the house to stick around for a while too–although it won’t be the home for my “dream” visits with my family… holiday visits to grandma and grandma — long summer nights with my kid(s) playing in the backyard through the sprinklers, running after fireflies like I did as a child–I thought maybe a smidgen of this could exist.

I know a house is just home and a home is just a house. I’ve lived enough places since leaving that house now… gasp… 18 years ago. I mean, I knew, deep down, we couldn’t hold on to it forever. Mom would move out when dad died at some point. But either time went by too fast or I didn’t think it would be this soon. She clearly wants to stay there… but it’s not possible, especially not with the vacation home as well.

She could potentially sell the vacation home, which would pay off some of the home equity. But she doesn’t want to do that, and I think it wouldn’t be wise anyway–they invested quite a bit in renovating that property and, while it’s small, it is a good place for her to live in her “young” old age. Even though some of her friends still live in our development in the northeast, many are moving away, and few still go to the social gatherings she goes to–whereas the 55+ community with the vacation home is filled with active seniors, at least in the winter months. I’m worried about how she’ll like it there in the summer when it gets extremely hot with violent storms and most of the residents leave to the north–but maybe she’ll be ok. She seems to find people to talk to wherever she goes (or talk “at”, but to her there’s no difference and she’s pleased either way.) So, the financial planner in me says — get her out of the northeast home as fast as possible. Like, yesterday fast.

But she’s committed to not moving until at least 2020, and she still thinks she can make it there much longer. She keeps asking me how long she can stay and I try to explain to her that there’s no exact number because the question becomes how much she needs left in her IRA to grow to afford her lifestyle–AND what is going to happen to her later in life if she needs long term care (since my father cancelled her long term care policy years ago saying it was too expensive.)

Now, she does have an after-tax income of $60k+ per year once she gets full social security benefits. That’s pretty darned good. If she had one home, especially one home that doesn’t cost as much as one with a lot of property and an aging architecture, then maybe she’ll be fine. She can sell the house, pay off the home equity, take the remaining $250k or so to pay off the taxes (est $80k) and family loan ($30k), and then take the remaining $150k and, ideally, invest that somewhere safe, while slowly drawing down the IRA and minimizing tax damage in the future.

She could, alternately, sell the vacation condo and put that money into the northeast home, but the costs are just too high there and she’ll still run out of money. I think with the vacation home she can actually live on her income, even if she wants to travel to visit her grandson or spend some time in NY.

The problem is, the longer she stays in the NJ home, the harder it is to ensure her life when she moves is financially ok. What I don’t want to happen is that she burns through her IRA in a few years because of credit card bills and loans and having to pay this ridiculous amount of taxes that sadly are just so high because of penalties due to my father not filing (yes, getting to that in a minute)…

So the taxes… I really don’t know what happened. My father always, ALWAYS paid the right amount each year. He didn’t always file on time–but if you pay the right amount and don’t file the IRS doesn’t actually care. Somehow, whether on purpose or by massive mistake, he was short about $23k one year and $18k the next. The $42k in taxes owed is crappy, but the penalties on that because it was never fixed are what is extraordinarily sad. For that money, not only did he take too much out of the IRA in two years to cause such high taxes owed, but he ALSO then didn’t pay those taxes or file or anything. I want to ask him WHY? But I can’t. Because, you know, he died. And I’m still dealing with processing that and all these feelings I have around wanting to empathize with him for being such a sad, sick man but also then being angry and grateful and who knows what else–is why I can’t sleep.

I’m now looking at any tax relief available to my mother, but it seems unlikely she will get any help from the IRS. Innocent Spouse theoretically applies to her–my father was abusive to her for years and refused to let her partake in household finances, even when she offered, and later, begged–especially regarding the taxes. He would yell at her and occasionally become violent. There are even police records of this (though not in the years the taxes are owed.) But “innocent spouse,” as far as I can tell, is for partners who lied on their returns. Well, he didn’t file a return, so there’s not much innocent spouse we can claim…

Now there is an abatement of penalty clause where, if you were in good standing the 3 years before the year you failed to file, you can get the penalties waived for that one year. But you only get to do this once. Not only was my father failing to file year after year (always having paid the full amount on time except apparently in 2011 when he had a small payment plan), it’s impossible to know if he already requested this one time penalty abatement. There are no records. He did all of his own taxes. My mother is perplexed–after going through all the of the papers… she says to me, it doesn’t make sense–where are all the taxes? The papers from the IRS?

My theory is he, either strategically or in a rage or in a fit of paranoia, threw them all out one day. Maybe he just straight up lost his mind and got rid of a box of important things by accident. Maybe he realized he did that and was so ashamed he just gave up on ever doing the taxes. Who knows.

One thing is for sure – he refused help–even from his few close friends and his family. And, for a man who said he wanted to leave his family with wealth and ensure his wife was financially ok for the rest of her life (which never made sense to me given how emotionally abusive to her on a daily basis) he sure made quite the mess. He just couldn’t admit he was struggling. He had way too much pride. And, in his final years, he didn’t want to accept his mortality. He told my mother she was overspending, but then he’d overspend himself. He once asked my mother how much my aunt and uncle gave me for my wedding — $500. He immediately wrote out a check to their daughter for $600! It wasn’t about generosity with him, though he’d like you to think it was. It was always about showing off how generous he was.

Even during the year of my wedding–I offered to pay for more of the wedding up front, even if he wanted to pay, so he wouldn’t have to withdraw so much out of his IRA that year. I knew the taxes would be high. No, he said. He was offended by the suggestion. He had the money and he wanted to spend it. Yes, I have guilt for spending it, but I didn’t know how bad things looked. Last I heard there was still $1M in the bank and a home that was paid off. I failed to dig in too much–but as blind as I was with eyes shut to the downfall of the great American dream, my mother seemed to have clawed her eyes out in order to be incapable of looking.

So now what? I have my own life to sort out here. I’m doing well, but have a long way to go. My first batch of RSUs vest in a few weeks… and with that I should have a $50k bonus after tax (should the stock market not completely disintegrate before Christmas) and I could say, you know what, mom, you guys paid for my college and wedding, and now I’m gifting you $50k (or, $15k in 2018 and $15k in 2019 and so on.) But what good would that really do? She needs to understand the value of money. I think I’m starting to get through to her a little bit. I paid for dinner the other night and she actually said thank you. It’s not that I want her to have to thank me – it’s that I want her to realize the value of a dollar. It may be too late to fix this mess… but maybe it isn’t. Maybe I can gift her a happy next however many years she has… for as narcissistic and childish as my mother is, I still think she’s been beaten down by an emotionally abusive mother then an emotionally and physically abusive husband, and she deserves the right to happiness in her old age. She has to throw out the clutter and really be wiling to simplify… and that would be good for all of us.

I just don’t know if I can convince her of this in time, and also let go from my crazy ideas to “save” my childhood home by either purchasing it or providing enough money in gift form to pay off the home equity or… plenty of bad ideas that not only wouldn’t help stop the bleeding, but also could financially ruin me as well. So I hope we can all make the right decisions and fast enough to stabilize and move on from this challenging period of our lives.

When Long Term Care Insurance Terminates (Or, Almost Does) Due to Dementia or Confusion

Welcome to the sandwich generation — taking care of kids and elders all at once. That was the message that I got loud and clear this week at 37 weeks pregnant and with a father in the hospital who has, sadly, accepted that he needs to begin using his long-term care policy to receive in-home living support.

The challenges of being 37 weeks pregnant are largely understood, but what about managing the care for a father with a terminal illness who has been to the hospital with repeat episodes of source-unidentifiable delirium within the past 2 months? Continue reading